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Amidst all of the net-zero pledges, sustainable investors are demanding that countries and companies alike forego greenwashing and transparently report how they are taking action on emissions-reductions. Can the momentum from November’s U.N. Climate Change Conference continue into 2022 and beyond?
"Policymakers, investors and society are serious about trying to transition and trying to transition fast," Jaakko Kooroshy, global head of sustainable investment research at FTSE Russell, which is part of the London Stock Exchange Group, told S&P Global Market Intelligence. “We’re going to see society becoming even pushier about it. So, you need a plan, and you need to have the right level of ambition in that plan.”
Two weeks of discussions between more than 200 countries and companies at COP26 concluded with a pact to keep efforts toward limiting global warming to 1.5° Celsius alive and an array of agreements aimed at strengthening emissions-reduction targets and the energy transition. Some nations, like the U.S., Australia, and South Korea, have introduced new net-zero goals in the weeks since COP26. But “post-COP26, many felt an air of deflation” from the “lack of visible commitment and priority from some of the world’s largest polluters” and “headline-grabbing pledges made in the first week of COP26 [that] have been overshadowed by inevitable questions around whether they will be realized,” S&P Global Dow Jones Indices’ managing director and global head of ESG indices Jaspreet Duhra said in a recent commentary.
In the Asia-Pacific region alone, S&P Global Platts Analytics' Future Energy Outlook demonstrates that the top 10 carbon-emitting countries face such an “extraordinary effort” in meeting 2-degree global warming target by 2050 that “a 1.5-degree target will be out of reach without greater ambition.”
Nearly 80% of a sample of 180 companies analyzed by S&P Global Market Intelligence have set a net-zero target of some kind. But like the countries in which they operate, many corporations haven’t outlined their actual actions to adjust their operations to reduce their emissions.
"Investors are saying to companies, 'It's not enough even to give us the interim targets, you've got to show us how you're going to get there,'" Kirsten Spalding, senior program director for the sustainability nonprofit Ceres Investor Network, told S&P Global Market Intelligence, explaining that investors who weigh climate change in their decision-making are leading while governments are following. "If you say you've got an interim target, but then you're not actually aligning your business practice with it, that's a problem."
Oil and gas conglomerates, mining companies, and the global steel industry are particularly prone to lag other sectors in reporting on their environmental commitments. Debating the need for emissions-reductions standards, green certificates, and climate-oriented governance, companies in these markets remain divided on how best to drive their energy transitions forward—which is holding back transparency.
"Right now, the world is facing ever more chaotic, highly unrealistic scenarios about the energy transition that are clouding the future … It's increasingly assumed the entire world can run on alternative fuels, and the vast energy system can be transformed virtually overnight, that investment requiring $115 trillion dollars can be made in 30 years,” Saudi Aramco President and CEO Amin Nasser said Dec. 6 at the 23rd World Petroleum Congress in Houston. “It's also assumed that the right transition strategy is in place … It is not, it's deeply flawed."
"I don't think we're going to be successful unless major [oil] companies step up and are part of solution … We cannot delude ourselves," Deputy Energy Secretary David Turk Dec. 6 at the same conference, according to S&P Global Platts. "We're already in 2021 ... and 2050 is not that many years away … It's 28 years. That is not a long period of time."
Today is Tuesday, December 14, 2021, and here is today’s essential intelligence.
Uncertainty in the Global Economy
Economic Research: The Financial Fragility Of U.S. Households And Businesses Declined To Its Lowest Level In Over A Decade
The financial conditions of U.S. households and nonfinancial corporates kept improving in the second quarter of 2021, as S&P Global Ratings’ financial fragility index dropped further below its historical average to the lowest level since the fourth quarter of 2010. The overall index dropped to -2.12 in the second quarter from -1.53 in the first, with improvements in both subindexes for households and firms.
—Read the full report from S&P Global Ratings
U.S. Supply Chain Issues Will Worsen Into 2022 As Transportation Woes Persist
Transportation is the biggest supply-side problem facing businesses as ships wait to unload off the California coast, said Oren Klachkin, lead U.S. economist with forecasting and analytics group Oxford Economics. Warehousing is also backed up, said Joel Naroff, president of consulting firm Naroff Economics. Bottlenecks in both areas must be fixed before there is a significant reduction in supply chain issues, Naroff said.
—Read the full article from S&P Global Market Intelligence
Distressed La. Property Insurer's Exposure Concentrated Around New Orleans
Two separate rate filings submitted to regulators by Americas Insurance Co. in June shows the company has at least $3.52 billions of insurance coverage within homeowners and dwelling coverages in the Pelican State. Roughly 81% of the total comes from the homeowner’s business line.
—Read the full article from S&P Global Market Intelligence
The Credit Cycle
U.S. Public Finance 2021 Year In Review: Growth, And Stimulus, Supported Ratings
As 2021 winds down, all of the S&P Global Ratings sector views in U.S. public finance are stable except for higher education. It's clear that the pandemic will remain pivotal to credit prospects in 2022 but to date it has not translated to major erosion in credit quality. The general direction of the economy will be important as inflation, supply chain disruptions, and labor shortages continue to weigh on economic growth.
—Read the full report from S&P Global Ratings
Market Dynamics
Warm Weather Melting Dreams Of $5/MMBtu Winter Gas
Warmer-than-normal winter weather over the eastern half of the U.S. is wrecking the hopes of those who looked for $5-$6/MMBtu natural gas prices this winter. Although the NYMEX natural gas futures contract traded above $5/MMBtu with peaks above $6/MMBtu in October, warm weather cut residential and commercial demand across most of the country in November.
—Read the full article from S&P Global Market Intelligence
Interview: High Gas Price Environment Likely To Persist In Medium Term: MET
The current high gas price environment in Europe is likely to persist in the medium term as some of the main market drivers are set to remain key factors in the future, the head of the trading arm of Switzerland's MET said in an interview. European gas prices remain at sustained highs having reached record levels in October on the back of strong demand, upstream disruptions, and winter supply concerns.
—Read the full article from S&P Global Platts
Commodities 2022: Brazilian Ethanol Price Drivers To Remain Volatile In 2022
Sugar's strong price premium over ethanol, volatility in the Brazilian real/U.S. dollar exchange rate, and unknown changes in the Petrobras ex-refinery gasoline price will remain key drivers for Center-South ethanol prices in 2022.
—Read the full article from S&P Global Platts
Banking Industry Under Pressure
BNP Paribas' Size, Cross-Border Claims Increase Most In Large Bank Assessment
France's BNP Paribas SA increased in size and cross-border claims more than any other large global bank in 2020. The lender logged the highest increases in overall size and cross-jurisdictional activity among global systemically important banks, or G-SIBs, at the end of 2020, as well as the highest overall risk score, as it moved up to a higher category, which means it must hold more capital.
—Read the full article from S&P Global Market Intelligence
Technology & Media
Streaming Stocks Slide As Competition Grows, Movie Releases Remain Scarce
The year to date has been volatile for companies with streaming strategies central to their business, and recently they have gone from Wall Street darlings to duds. Each of Redbox Automated Retail LLC, Roku Inc., and Netflix Inc. have seen their stocks pummeled in recent weeks as investors weighed concerns about slowing growth and a pandemic-depleted supply of new movie releases.
—Read the full article from S&P Global Market Intelligence
AWS Suffers Outage As Global Internet Disruptions Spike
A Dec. 7 outage at Amazon.com Inc.'s Amazon Web Services Inc. led the list of global internet disruptions that occurred during the week of Dec. 4. Overall, the number of disruptions globally jumped 60% to 444, according to data from ThousandEyes, a network-monitoring service owned by Cisco Systems Inc. U.S. outages last week rose 133% to 175, comprising 39% of all global disruptions and an increase from 27% in the prior week.
—Read the full article from S&P Global Market Intelligence
ESG in the Time of COVID-19
Path To Net-Zero: Stakeholders Demand Action On Ambitions As Pledges Swell
Corporations ramped up commitments to drive down their greenhouse gas emissions in the last year, offering the promise of trillions of dollars of green investments. Now, investors and activists are increasingly demanding transparency and action to back those pledges. Some companies said they cannot reach zero emissions, but many seek to shrink their carbon footprints while offsetting remaining emissions by investing in carbon reduction elsewhere in the economy.
—Read the full article from S&P Global Market Intelligence
Feature: Strategic Metals Availability May Jeopardize EV Targets: Industry
Strategic or critical metals availability at the right price may threaten some countries' ability to meet electric vehicle take-up targets, disordering the energy transition, key metals industry players told S&P Global Platts. Nickel, cobalt, and lithium used in EV batteries, copper for charging infrastructure, and rare earths for EV motor magnets are among materials critical for transport decarbonization.
—Read the full article from S&P Global Platts
Listen: SAF Potential Takes Off As Aviation Emissions Set To Rise With Pandemic Recovery
The pandemic interrupted a steady surge in global air travel demand, when passenger numbers tripled in just over 20 years. Jet fuel demand remains below pre-pandemic levels and is not expected to fully recover until late 2025 or 2026, according to S&P Global Platts Analytics. Yet the race is still on to limit aviation emissions growth because there are no quick fixes for decarbonizing this sector.
—Listen and subscribe to Capitol Crude, a podcast from S&P Global Platts
The Future of Energy & Commodities
Saudi Arabia, Kuwait Say They Are Working To Raise Neutral Zone Crude Oil Production
Crude production in the Neutral Zone's onshore Wafra and offshore Khafji fields has suffered from technical challenges stemming from its lengthy shutdown, sources have told S&P Global Platts, with output ranging from below 200,000 b/d some months to as high as 270,000 b/d. Prior to their shutdown in the mid-2010s, the fields typically produced a combined 500,000 b/d.
—Read the full article from S&P Global Platts
Biden Team Begins Carrying Out Curbs On Overseas Fossil Fuel Project Support
Following through on President Biden's January executive order calling for the U.S. to develop a plan to help flow capital toward climate aligned investments, the Biden administration has told U.S. embassies to stem support for carbon-intensive energy projects internationally.
—Read the full article from S&P Global Platts
Written and compiled by Molly Mintz.